Clearing System That Determines Margin Requirements for Financial Portfolios

ABSTRACT

Methods, systems and apparatuses are described for calculating a performance bond amount for a portfolio including interest rate swaps. A risk calculation module (or risk processor) may assist in the calculation. In some examples, values, such as swap (DV01) dollar values and volatility values, and adjustments/factors, such as calendar charge adjustments and liquidity charge minimums, may be used to enhance the margin calculation. These values may be maintained and updated in various ways, including but not limited to, lookup tables, matrices, and other structures. The margin calculations may be used by an exchange or clearinghouse to request a portfolio holder to deposit additional funds towards a performance bond associated with the portfolio.

CROSS-REFERENCE TO RELATED APPLICATIONS

This is application is a continuation of U.S. patent application Ser.No. 13/489,693, filed Jun. 6, 2012, and entitled “Clearing System ThatDetermines Margin Requirements For Financial Portfolios,” whichapplication is a continuation of U.S. patent application Ser. No.12/649,267, filed Dec. 29, 2009, and entitled “Clearing System ThatDetermines Margin Requirements For Financial Portfolios” (now U.S. Pat.No. 8,239,308). The entire disclosures of application Ser. Nos.13/489,693 and 12/649,267 are incorporated by reference herein.

TECHNICAL FIELD

The present invention relates to a portfolio of financial instruments.In particular, aspects of the invention relate to calculating aperformance bond amount for a portfolio of financial instruments.

BACKGROUND

According to Wikipedia, an interest rate swap (IRS) is a derivative inwhich one party exchanges a stream of interest payments for anotherparty's stream of cash flows. IRSs can be used by hedgers to managetheir fixed or floating assets and liabilities. They can also be used byspeculators to replicate unfunded bond exposures to profit from changesin interest rates. IRS may come in many different types, includingfixed-for-floating rate swaps, floating-for-floating rate swaps, andfixed-for-fixed rate swaps. The present value of a plain vanilla swapcan be computed using well-known formulas: the value of the fixed leg isgiven by the present value of the fixed coupon payments known at thestart of the swap, and the value of the floating leg is given by thepresent value of the floating coupon payment determined at the agreeddates of each payment. Therefore, at the time the IRS is entered into,there is no advantage to either counterparty.

IRSs, however, expose their holders to interest rate risk and creditrisk, Wikipedia explains. In a plain vanilla fixed-for-floating swap,the party who pays the floating rate benefits when rates fall.Meanwhile, credit risk on the IRS comes into play if the swap is in themoney or not. If one of the parties is in the money, then that partyfaces credit risk of possible default by another party.

Techniques for measuring risk of a swap are well known in the industry.The DV01 approach uses the dollar value of a one basis point (bps)change in a swap's fixed interest rate to measure risk. DV01 is measuredin units of USD per bps. Nevertheless, enhanced techniques and devicesto better calculate margin risk associated with a portfolio comprisingIRSs is desired.

BRIEF SUMMARY

A method is disclosed for calculating a performance bond amount for aplurality of interest rate swaps in a portfolio of financial assetsusing a risk calculation module. The margin calculations may use a swap(DV01) dollar value and a volatility value to determine the amount of aperformance bond required of a holder of the portfolio. If the margincalculation results in a calculated performance bond amount that isgreater than the current amount of the holder's margin account balance,a request may be sent to increase the margin account balance.

In another embodiment in accordance with aspects of the invention, theperformance bond amount calculated by the risk calculation module may beenhanced by considering a calendar charge adjustment to account fornon-parallel shifts in a swap curve. In yet another embodiment, theperformance bond amount calculated by the risk calculation module may beenhanced by considering a liquidity charge minimum.

Moreover, various aspects of the aforementioned methodology may beimplemented in an apparatus comprising a risk calculation module, one ormore processors (e.g., risk processor), one or more memories, and othermodules. Information may be stored in the memories to assist the riskcalculation module (or risk processor) in calculating a performance bondamount. Information corresponding to a calendar charge lookup table,liquidity charge minimum lookup table, volatility lookup table, and/orswap DV01 matrix may be stored in the one or more memories.

Of course, the methods and systems of the above-referenced embodimentsmay also include other additional elements, steps, computer-executableinstructions, or computer-readable data structures. In this regard,other embodiments are disclosed and claimed herein as well. In otherembodiments, the present invention can be partially or whollyimplemented on a computer-readable medium, for example, by storingcomputer-executable instructions or modules, or by utilizingcomputer-readable data structures.

The details of these and other embodiments of the present invention areset forth in the accompanying drawings and the description below. Otherfeatures and advantages of the invention will be apparent from thedescription and drawings, and from the claims.

BRIEF DESCRIPTION OF DRAWINGS

The present invention may take physical form in certain parts and steps,embodiments of which will be described in detail in the followingdescription and illustrated in the accompanying drawings that form apart hereof, wherein:

FIG. 1 depicts an illustrative computer network system that may be usedto implement various aspects of the invention;

FIG. 2 illustrates an exemplary margining methodology in accordance withaspects of the invention;

FIG. 3 shows a flowchart of an exemplary risk calculation module (orrisk processor) in accordance with various aspects of the invention;

FIG. 4 shows a high-level illustration of an exemplary swap DV01 matrixin accordance with various aspects of the invention;

FIG. 5 shows a high-level illustration of an exemplary volatility lookuptable in accordance with various aspects of the invention;

FIG. 6 shows a high-level illustration of an exemplary calendar chargelookup table in accordance with various aspects of the invention; and

FIG. 7 shows a high-level illustration of a liquidity charge minimumlookup table in accordance with various aspects of the invention.

DETAILED DESCRIPTION

Methods, systems and apparatuses are described for calculating aperformance bond amount for a portfolio of financial assets, includinginterest rate swaps. A risk calculation module (or risk processor) mayassist in the calculation. In some examples, values (e.g., swap DV01s,volatility values, etc.) and adjustments/factors (e.g., calendar chargeadjustments, liquidity charge minimums, etc.) may be used to enhance themargin calculation. These values may be maintained and updated invarious ways, including but not limited to, lookup tables, matrices, andother structures. The margin calculations may be used by an exchange orclearinghouse, for example, to request a portfolio holder to depositadditional funds into a margin account towards a performance bond. Theclearinghouse (e.g., central counterparty to financial products) may usethe performance bond to counter margin risk associated with theportfolio.

FIG. 1 depicts an illustrative operating environment that may be used toimplement various aspects of the invention. The operating environment isonly one example of a suitable operating environment and is not intendedto suggest any limitation as to the scope of use or functionality of theinvention. Aspects of the invention are preferably implemented withcomputer devices and computer networks that allow theexchange/transmission/reception of information including, but notlimited to performance bond amount requirements and trading information.An exchange computer system 100 receives market data, analyzeshistorical data, and calculates various values, e.g., performance bondamounts, in accordance with aspects of the invention.

Exchange computer system 100 may be implemented with one or moremainframes, servers, gateways, controllers, desktops or other computers.The exchange computer system 100 may include one or more modules,processors, databases, and other components, such as those illustratedin FIG. 1. Moreover, computer system 100 may include one or moreprocessors 140 (e.g., Intel® microprocessor, AMD® microprocessor, riskprocessor, etc.) and one or more memories 142 (e.g., solid state, DRAM,SRAM, ROM, Flash, non-volatile memory, hard drive, registers, buffers,etc.) In addition, an electronic trading system 138, such as the Globex®trading system, may be associated with an exchange 100. In such anembodiment, the electronic trading system includes a combination ofglobally distributed computers, controllers, servers, networks,gateways, routers, databases, memory, and other electronic dataprocessing and routing devices. The trading system may include a tradingsystem interface having devices configured to route incoming messages toan appropriate devices associated with the trading system. The tradingsystem interface may include computers, controllers, networks, gateways,routers and other electronic data processing and routing devices. Ordersthat are placed with or submitted to the trading system are received atthe trading system interface. The trading system interface routes theorder to an appropriate device.

A match engine module 106 may match bid and offer prices for ordersconfigured in accordance with aspects of the invention. Match enginemodule 106 may be implemented with software that executes one or morealgorithms for matching bids and offers for bundled financialinstruments in accordance with aspects of the invention. The matchengine module and trading system interface may be separate and distinctmodules or component or may be unitary parts. Match engine module may beconfigured to match orders submitted to the trading system. The matchengine module may match orders according to currently known or laterdeveloped trade matching practices and processes. In an embodiment, bidsand orders are matched on price, on a FIFO basis. The matching algorithmalso may match orders on a pro-rata basis or combination of FIFO and prorata basis. Other processes and/or matching processes may also beemployed.

Furthermore, an order book module 110 may be included to compute orotherwise determine current bid and offer prices. The order book module110 may be configured to calculate the price of a financial instrument.Moreover, a trade database 108 may be included to store historicalinformation identifying trades and descriptions of trades. Inparticular, a trade database may store information identifying orassociated with the time that an order was executed and the contractprice. The trade database 108 may also comprise a storage deviceconfigured to store at least part of the orders submitted by electronicdevices operated by traders (and/or other users). In addition, an orderconfirmation module 132 may be configured to provide a confirmationmessage when the match engine module 106 finds a match for an order andthe order is subsequently executed. The confirmation message may, insome embodiments, be an e-mail message to a trader, an electronicnotification in one of various formats, or any other form of generatinga notification of an order execution.

A market data module 112 may be included to collect market data andprepare the data for transmission to users. In addition, a riskcalculation module 134 may be included in computer system 100 to computeand determine the amount of risk associated with a financial product orportfolio of financial products. An order processing module 136 may beincluded to receive data associated with an order for a financialinstrument. The module 136 may decompose delta based and bulk ordertypes for processing by order book module 110 and match engine module106. The order processing module 136 may be configured to process thedata associated with the orders for financial instruments.

A user database 102 may include information identifying traders andother users of exchange computer system 100. Such information mayinclude user names and passwords. A trader operating an electronicdevice (e.g., computer devices 114, 116, 118, 120 and 122) interactingwith the exchange 100 may be authenticated against user names andpasswords stored in the user database 112. Furthermore, an account datamodule 104 may process account information that may be used duringtrades. The account information may be specific to the particular trader(or user) of an electronic device interacting with the exchange 100.

The trading network environment shown in FIG. 1 includes computer (i.e.,electronic) devices 114, 116, 118, 120 and 122. The computer devices114, 116, 118, 120 and 122 may include one or more processors, orcontrollers, that control the overall operation of the computer. Thecomputer devices 114, 116, 118, 120 and 122 may include one or moresystem buses that connect the processor to one or more components, suchas a network card or modem. The computer devices 114, 116, 118, 120 and122 may also include interface units and drives for reading and writingdata or files. Depending on the type of computer device, a user caninteract with the computer with a keyboard, pointing device, microphone,pen device or other input device. For example the electronic device maybe a personal computer, laptop or handheld computer, tablet pc and likecomputing devices having a user interface. The electronic device may bea dedicated function device such as personal communications device, aportable or desktop telephone, a personal digital assistant (“PDA”),remote control device, personal digital media system and similarelectronic devices.

Computer device 114 is shown communicatively connected to exchangecomputer system 100. Exchange computer system 100 and computer device114 may be connected via a T1 line, a common local area network (LAN) awireless communication device or any other mechanism for communicativelyconnecting computer devices. Computer (i.e., electronic) devices 116 and118 are coupled to a local area network (“LAN”) 124. LAN 124 may haveone or more of the well-known LAN topologies and may use a variety ofdifferent protocols, such as Ethernet. Computers 116 and 118 maycommunicate with each other and other computers and devices connected toLAN 124. Computers and other devices may be connected to LAN 124 viatwisted pair wires, coaxial cable, fiber optics or other media.Alternatively, a wireless personal digital assistant device (PDA) 122may communicate with LAN 124 or the Internet 126 via radio waves. PDA122 may also communicate with exchange computer system 100 via aconventional wireless hub 128. As used herein, a wireless PDA 122includes mobile telephones and other devices that communicate with anetwork via radio waves. FIG. 1 also shows LAN 124 connected to theInternet 126. LAN 124 may include a router to connect LAN 124 to theInternet 126. Computer device 120 is shown connected directly to theInternet 126, however, the connection may be via a modem, DSL line,satellite dish or any other device for communicatively connecting acomputer device to the Internet.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored oncomputer-readable storage medium. Embodiments also may take the form ofelectronic hardware, computer software, firmware, including objectand/or source code, and/or combinations thereof. Embodiment may bestored on computer-readable media installed on, deployed by, residenton, invoked by and/or used by one or more data processors (e.g., riskprocessor), controllers, computers, clients, servers, gateways, networksof computers, and/or any combinations thereof. The computers, servers,gateways, may have one or more controllers configured to executeinstructions embodied as computer software. For example, computer device114 may include computer-executable instructions for receiving interestrate and other information from computer system 100 and displaying to auser. In another example, computer device 118 may includecomputer-executable instructions for receiving market data from computersystem 100 and displaying that information to a user. In yet anotherexample, a processor 140 of computer system 100 may be configured toexecute computer-executable instructions that cause the system 100 tocalculate a performance bond amount required to balance risk associatedwith a portfolio.

Of course, numerous additional servers, computers, handheld devices,personal digital assistants, telephones and other devices may also beconnected to computer system 100. Moreover, one skilled in the art willappreciate that the topology shown in FIG. 1 is merely an example andthat the components shown in FIG. 1 may be connected by numerousalternative topologies.

FIG. 2 illustrates an exemplary margining methodology to calculateperformance bond amounts for interest rate swaps. In step 202, a riskcalculation module (or risk processor) may be used to calculate aperformance bond amount for a plurality of interest rate swaps in aportfolio. The portfolio may include financial instruments other thanjust spot vanilla interest rate swaps. For example, the portfolio may beusing interest rate swaps to hedge against risk associated with fixed orfloating assets and liabilities in the portfolio. In addition, thefinancial instruments in the portfolio may be based in differentcurrencies.

In step 204, the balance of an account (e.g., margin account) associatedwith the portfolio may be compared with the performance bond amountcalculated in step 202. If the balance is insufficient to cover thecalculated performance bond amount, then a notification may be generatedthat an increase in the amount of the account to at least the calculatedperformance bond amount is required. The holder of the portfolio may berequested (in step 206) to increase the amount of the margin account toat least the calculated performance bond amount. The holder of theportfolio may be the owner of the portfolio, a trustee appointed to actas fiduciary for managing the portfolio, or any other person or entityresponsible for the portfolio. The generated notification and requestingmay be performed through electronic communication (e.g., e-mail, SMS,instant message, etc.) or through manual communication (e.g., a “margincall” from a customer service representative). In an alternativeembodiment, the holder may have a prior agreement with an exchange (orother entity) to automatically increase a margin account amount simplyin response to receiving a request (of step 206). In such anarrangement, information about an account designated by the holder maybe maintained in an account data module 104 and the account may befunded with sufficient assets (e.g., from another account, from anotherbrokerage account, etc.) to cover such “margin calls.”

Meanwhile, if the margin account balance is sufficient to cover thecalculated performance bond amount, then no action may be necessary(e.g., as in step 208). Alternatively, the holder of the portfolio maybe notified (in step 210) that the margin account balance is in surpluscompared to the requisite performance bond amount calculated (in step202). The notification (of step 210) may be carried out in numerousways, including but not limited to, using electronic communication(e.g., e-mail, SMS, instant message, etc.) or manual communication(e.g., a “margin call” from a customer service representative).

Referring to FIG. 3, a risk calculation module (or risk processor) inaccordance with various aspects of the invention may calculate aperformance bond amount for a plurality of interest rate swaps in aportfolio. The risk calculation module (or risk processor) may calculatethe basic performance bond amount based a function (e.g.,multiplication) of a swap (DV01) dollar value and a volatility valuecorresponding to each interest rate swap in the portfolio. For example,the risk calculation module (or risk processor) may receive (in step302) a swap (DV01) dollar value for an interest rate swap. Swap (DV01)dollar values are measured in the same units as DV01, but are a functionof a swap's remaining maturity and its fixed rate. The risk calculationmodule (or risk processor) may also receive (in step 304) a volatilityvalue for an interest rate swap. The risk calculation module (or riskprocessor) may perform a function (e.g., multiplication) of these twovalues to determine the basic performance bond amount required to managethe risk associated with the interest rate swap. If the portfoliocontains multiple interest rate swaps, the basic performance bond amountmay be calculated in the aforementioned manner for each interest rateswap in the portfolio, and, for example, the multiplications may besummed (in step 306) to calculate a total performance bond amountrequired for the plurality of interest rate swaps in the portfolio.

The volatility value received at the risk calculation module (or riskprocessor) and used in the basic performance bond amount calculation maybe determined using a volatility lookup table indexed by swap tenors atpredetermined intervals. The volatility value of an interest rate swapis based on the time remaining until maturity of the interest rate swap.In other words, the swap tenor may indicate the amount of time remaininguntil the swap matures. The volatility value may be irrespective of thefixed rate of an interest rate swap. For example, all interest rateswaps with one year remaining until maturity may be grouped together andanalyzed to determine the volatility value for the particular swap tenor(e.g., 1 year). As such, a search of the volatility lookup table by swaptenor (i.e., the amount of time remaining until maturity) returns thevolatility value (in units of basis points) for the appropriate swaptenor. The volatility value may be input into the risk calculationmodule (or risk processor).

The volatility lookup table may be populated with values using theresults of a historical analysis of spot swap fixed settlements. In oneexample, two years (or other duration of time) worth of historical 2-dayreturns (or returns of over another time period) of spot swap fixedsettlements may be obtained from a data service (e.g., Bloomberg, etc.)or from the trade database 108. These two-day returns may be used toobtain 99^(th) percentile (or other percentile) historical volatilitiesfor historical spot swap data. For example, FIG. 5 illustrates anexemplary volatility lookup table in accordance with various aspects ofthe invention. For example, for an interest rate swap with five monthsremaining (i.e., a 5 M tenor), FIG. 5 indicates a volatility value of 80bps (see ref. 502). Meanwhile, for interest rate swaps, irrespective oftheir fixed rates, with a 3 year tenor, the volatility value is 40 bps(see ref. 504). One skilled in the art will appreciate that thevolatility lookup table may be implemented in various ways, includingbut not limited to, as a software modules (e.g., “Other Module” inFIG. 1) that receives swap tenor as an input parameter returns thecorresponding volatility value. The volatility lookup table may bestored in computer memory and accessed by such a module. One skilled inthe art will appreciate that the swap tenor value provided as an inputparameter may be rounded as appropriate to identify a swap tenor“bucket” (i.e., substantially same time remaining until maturity) in thevolatility lookup table. In an alternative embodiment, the volatilitylookup table may be more or less granular with respect to swap tenor.For example, with sufficient computing power available, the swap tenorgranularity may be weekly, daily, hourly, in realtime, etc., and thevalues in the table may be updated weekly, daily, hourly, in realtime,etc.

Furthermore, the swap (DV01) dollar value received at the riskcalculation module (or risk processor) and used in the basic performancebond amount calculation may be determined using a swap DV01 matrix basedon the time remaining until maturity of the interest rate swap (i.e.,swap tenor) and the fixed rate of the interest rate swap. Unlike avolatility value, the swap (DV01) dollar value for an interest rate swapis dependent on the fixed rate of the swap. As such, a search of the2-dimensional swap DV01 matrix by both swap tenor (i.e., the amount oftime remaining until maturity) and the fixed rate of the swap, thenreturns the swap (DV01) dollar value (in units of USD per basis point)for the appropriate swap tenor and fixed rate. The swap (DV01) dollarvalue may be input into the risk calculation module (or risk processor).

Referring to FIG. 4, the swap DV01 matrix may accommodate swaps of anyswap tenor. In one example, the swap (DV01) dollar value of a 3 yearswap tenor with a fixed rate of 2.060% may be located at ref 402 in FIG.4. In another example, the swap DV01 matrix may run out to 30 years, andbe broken into a granularity of months. One skilled in the art willappreciate that the granularity may be increased or decreased asdesired. For example, the granularity may be increased to show dailymaturities. In another example, monthly increments may be shown for swaptenors up to one year, then swap tenors may be shown at quarterlyincrements. Likewise, the swap DV01 matrix may accommodate swaps withina range of interest rates (e.g., 0.1% to 10.0%). The granularity of thefixed swap rates may be increased or decreased as desired. For example,the fixed rates may increment in 10 bps increments. The swap DV01 matrixmay be updated daily because the values in the matrix depend on swaptenor, which inherently changes with the passage of time. The swap DV01matrix may be populated with data generated from a historical analysis.

One skilled in the art will appreciate that the swap DV01 matrix may beimplemented in various ways, including but not limited to, as a softwaremodules (e.g., “Other Module” in FIG. 1) that receives swap tenor andinterest rate as input parameters and returns the corresponding swap(DV01) dollar value. The swap DV01 matrix may be stored in computermemory and accessed by such a module. One skilled in the art willappreciate that the values provided as an input parameters may berounded as appropriate to identify a swap tenor “bucket” or interestrate “bucket” in the matrix. With sufficient computing power available,the matrix may be updated weekly, daily, hourly, in realtime, etc.

Per the aforementioned basic margin calculation methodology thecalculated performance bond amount is based on swap dollar values andvolatilities of each swap contract. However, such calculations may beenhanced to fully account for the totality of the risk associated withthe portfolio. For example, margin risk calculated based purely on aswap dollar value basis can result in a performance bond amount that istoo low to be commensurate with the true risk of a portfolio. Rather,the risk calculation may be enhanced by providing consideration tonumerous factors, including, but not limited to, liquidity and otherforms of risk posed by interest rate swaps.

The risk calculation module (or risk processor), in some embodiments inaccordance with aspects of the invention, may adjust the calculatedperformance bond amount by a calendar charge adjustment to account fornon-parallel shifts in the swap curve. Calendar charges are margincharges in addition to the aforementioned basic margin calculations(based on swap dollar values and volatility values). They account forthe true 99% 2-day risk with a given spread. Calendar charges may becalculated using historical data (e.g., two years of historical data,with 2-days of P&L coverage, and 99% value at risk (VaR)).

A calendar charge lookup table may be stored in computer memory (e.g.,memory accessible to the risk calculation module) to provide calendarcharge adjustment values for particular swap tenor combinations in theportfolio. For example, assume the basic performance bond calculation(based on swap dollar values and volatility values) results in aperformance bond amount of $650. Also assume that the portfolio containsjust two interest rate swaps: one with swap tenor of 1 month and anotherwith a swap tenor of 3 years. The calendar charge lookup table mayprovide that a 1 month to 3 year spread in the exemplary portfolioresults in a calendar charge adjustment value of $250. As such, thetotal performance bond amount required to manage the risk of theportfolio is $900 (i.e., $650 plus $250). One skilled in the art willappreciate that the calendar charge lookup table may be divided intovarying granularity. For example, in FIG. 6, the table may be simplifiedby dividing swap tenors into tiers and assigning a calendar chargeadjustment value based on tier combinations (see ref. 602). A first tiermay be all swap tenors 1 year or less, a second tier may be swap tenorsfrom 1 year to 2 year, and a third tier may be swap tenors greater than2 years, but not less than 10 years, and a fourth tier may be all swaptenors greater than 10 years. In an alternate embodiment, the calendarcharge lookup table may be done at the finest granularity (e.g., daily)to provide for greater precision in calculating the adjustment value.One skilled in the art will appreciate that the amount of computingpower required for accessing and maintaining such a table would begreater.

The risk calculation module (or risk processor), in some embodiments inaccordance with aspects of the invention, may adjust the calculatedperformance bond amount to a liquidity charge minimum to account forliquidity risks inherent to swap tenors. Liquidity charges may becalculated using historical data (e.g., two years of historical data,with 2-days of P&L coverage, and 99% VaR). The liquidity charge minimummay be used to ensure that performance bond requirements are not toolow. For example, FIG. 7 illustrates an exemplary liquidity chargeminimum lookup table indexed by swap tenor tiers and gross notionalvalues. For example, a portfolio of three 1-year swaps with a grossnotional amount of $6 million, would be subjected to a liquidity chargeminimum of $400 (see ref 702). As such, if the calculated performancebond amount is less than $400, then the performance bond amount may beadjusted at the risk calculation module (or risk processor) to be atleast $400. Meanwhile, if the calculated performance bond amount isalready greater than the $400 floor, then the performance bond amountmay be left unchanged.

In accordance with aspects of the invention, a clearinghouse may act asa central counter party on the interest rate swaps. As such, theclearinghouse may centrally clear the interest rate swaps in theportfolio. Moreover, the clearinghouse may be able to calculateperformance bond amount requirements on a daily (or other predeterminedinterval) basis or realtime basis. At least one benefit of anexchange-traded swap (i.e., centrally cleared), as opposed to theover-the-counter (OTC) type, is that the swap may be is cleared,marked-to-market, and facilitated by the clearinghouse. This may promisemore interesting capital efficiencies for institutions that maycross-margin one swap against another.

In another embodiment in accordance with aspects of the invention,software modules may be included in computer system 100 to provide aholder of a portfolio with advance notice of the effect of a possibletrade on margin requirements. As such, the holder (e.g., trader) mayconsider the margin account effects of his/her actions beforeproceeding, thus avoiding a potential margin call. In yet anotherembodiment, an interactive display may be generated to show the totalgross notional value of a portfolio (or group of portfolios) and theperformance bond amount posted in association with those portfolio(s).As such, an auditor of a clearinghouse can instantly view and manage therisk at any given time. Other information, e.g., charges due to curveshocks, spread charges, total margin, portfolio DV01, gross notionalvalue, and other information may be displayed on the graphical userinterface. One skilled in the art will appreciate that the numerous dataand analysis described above may be used to enhance risk management of aclearinghouse.

The present invention has been described herein with reference tospecific exemplary embodiments thereof. It will be apparent to thoseskilled in the art that a person understanding this invention mayconceive of changes or other embodiments or variations, which utilizethe principles of this invention without departing from the broaderspirit and scope of the invention as set forth in the appended claims.For example, although numerous examples recite interest rate swaps, oneskilled in the art will appreciate that the novel principles disclosedherein may be applied to other types of financial instruments and stillfall within the scope of the invention contemplated herein.

1. A method comprising: calculating, using an exchange computer system,an initial value for a performance bond amount for one or more interestrate swaps in a portfolio of financial assets; and calculating, usingthe exchange computer system, an adjusted value for the performance bondamount by adjusting the initial value by a calendar charge adjustment toaccount for non-parallel shifts in a swap curve.
 2. The method of claim2, further comprising generating a notification based on the adjustedvalue.
 3. The method of claim 1, wherein calculating the initial valuecomprises calculating an initial value as a function of first and secondinputs, the first input comprises a value based on a remaining maturityand fixed rate of the at least one interest rate swap, and the secondinput comprises a value based on a value determined without regard tothe fixed interest rate of the at least one interest rate swap.
 4. Themethod of claim 3, wherein the first input comprises a swap dollar valueand the second input comprises a volatility value.
 5. The method ofclaim 4, wherein calculating the initial value comprises multiplying thefirst input by the second input.
 6. The method of claim 1, whereincalculating the initial value comprises calculating an initial value fora performance bond amount for a plurality of interest rate swaps,calculating the initial value further comprises, for each swap of theplurality, multiplying a swap value corresponding to the swap by avolatility value corresponding to the swap to obtain a productcorresponding to the swap, and calculating the initial valueadditionally comprises summing the products corresponding to the swapsof the plurality.
 7. An apparatus comprising: a computer memory storingcomputer-executable instructions; and a processor coupled to the memoryand configured to execute the instructions so as to cause the apparatusto calculate an initial value for a performance bond amount for one ormore interest rate swaps in a portfolio of financial assets, andcalculate an adjusted value for the performance bond amount by adjustingthe initial value by a calendar charge adjustment to account fornon-parallel shifts in a swap curve.
 8. The apparatus of claim 7,wherein calculating the initial value comprises calculating an initialvalue as a function of first and second inputs, the first inputcomprises a value based on a remaining maturity and fixed rate of the atleast one interest rate swap, and the second input comprises a valuebased on a value determined without regard to the fixed interest rate ofthe at least one interest rate swap.
 9. The apparatus of claim 8,wherein the first input comprises a swap dollar value and the secondinput comprises a volatility value.
 10. The apparatus of claim 9,wherein calculating the initial value comprises multiplying the firstinput by the second input.
 11. The apparatus of claim 7, whereincalculating the initial value comprises calculating an initial value fora performance bond amount for a plurality of interest rate swaps,calculating the initial value further comprises, for each swap of theplurality, multiplying a swap value corresponding to the swap by avolatility value corresponding to the swap to obtain a productcorresponding to the swap, and calculating the initial valueadditionally comprises summing the products corresponding to the swapsof the plurality.
 12. A non-transitory computer-readable storage mediumcontaining computer-executable instructions for performing a methodcomprising: calculating an initial value for a performance bond amountfor one or more interest rate swaps in a portfolio of financial assets;and calculating an adjusted value for the performance bond amount byadjusting the initial value by a calendar charge adjustment to accountfor non-parallel shifts in a swap curve.
 13. The non-transitorycomputer-readable storage medium of claim 12, wherein calculating theinitial value comprises calculating an initial value as a function offirst and second inputs, the first input comprises a value based on aremaining maturity and fixed rate of the at least one interest rateswap, and the second input comprises a value based on a value determinedwithout regard to the fixed interest rate of the at least one interestrate swap.
 14. The non-transitory computer-readable storage medium ofclaim 13, wherein the first input comprises a swap dollar value and thesecond input comprises a volatility value.
 15. The non-transitorycomputer-readable storage medium of claim 14, wherein calculating theinitial value comprises multiplying the first input by the second input.16. The non-transitory computer-readable storage medium of claim 12,wherein calculating the initial value comprises calculating an initialvalue for a performance bond amount for a plurality of interest rateswaps, calculating the initial value further comprises, for each swap ofthe plurality, multiplying a swap value corresponding to the swap by avolatility value corresponding to the swap to obtain a productcorresponding to the swap, and calculating the initial valueadditionally comprises summing the products corresponding to the swapsof the plurality.